tv First Up With Angie Lau Bloomberg October 6, 2015 7:00pm-8:01pm EDT
♪ angie: running out of steam. biotech brings wall street's longest run this year to an and. -- end. gains as the dollar weakens. yum plunges in, late trading. view, the a global yen -- the yuan passes the yen to become the world's most used currency. welcome to first up. coming to you live from bloomberg asian headquarters
right here in hong kong and streaming on your mobile and bloomberg.com. let's check the markets. 200 justlia, where asx started training. it is fractionally higher, pretty much flat, at the start of the session. australia dollar spot less than one u.s. cents. -- 71 u.s. cents. zealand, we had it climbing fractionally higher as well. new zealand dollar spot. check that out. the kiwi at 65 u.s. cents a level. we are also getting down to the opens in japan and korea. japan, nikkei to 25 close like this yesterday -- 1% up. chicago futures pointing to a slightly higher open after a mix market close on wall street. of course, we are awaiting that doj decision coming out today, most surveyed by bloomberg
believe that we are going to stay steady. at 120.22.is china remains closed. trading resume on thursday. fall, bringing the close to the longest rally of the year. let's get more from new york. oliver? today. stocks are down we were not able to get that six-day rally. stocks have been getting a pretty good bump for the past five days. what today boiled unto was more weakness in biotech. it is hard to get past that right now. july,ghs that they had in the container -- you continue to see hedge fund investors and others backing out for a myriad of reasons -- the profit taking aspect of it, from the idea that we had some political overhang
-- a tweet started this thing -- and you have weaker earnings. there are two thing companies that represent the index expectations of higher growth in the third quarter, but they actually came out today and said, guess what, sales are 5%.ally down about so you now have the fundamental concern filed on top of circumstantial things. you saw that on biotech. the flip side, you saw energy companies doing well today on the back of a fall rally, and oil up 5%. you are starting to see some with energy and picking that up. that is providing a little bit of a boost to the market, despite being down overall. course, thend of imf released its global outlook. tell us more. all of our: this is an -- this is another nail
in the coffin for the global growth picture. cutting it further is not terribly surprising. i don't think that comes as a shock to any investor who has been looking at global markets for the past couple of months, really this entire year. that has been a major issue weighing on stocks that is bleeding over to commodities and transitions. you're beginning to see the investors in the u.s. have despite the fact that we have come off of august lows. if you look at short interest canss stoxx in the s&p, you see it investors adding to their short positions, when traditionally after a 12% time -- decline they will cover that. it makes you wonder how far investors think the market can go down from here. angie: all of aerobics, the -- all over, -- oliver, fix for that. back in asia, we saw the impact
of china on shares of yum brands plunging in post-market trade. looking at market reaction, investors are not convinced that the worst is over. david is watching this. david: good morning. they are not going to be their target. revenue and profits third quarter missed estimates. the guidance especially in the china business was not good despite the fact that they did manage to see an increase in up.it margins and sales two parts to this. first, if you look at the entire business and consider the number of new restaurants that they have put in place across all the brands, yum side isn't increase in sales. our that is the reaction, we were down as much as 19%. increase, a 2% increase in revenues. profit was up 10%, and you have 360 restaurants, 100 of which are in china.
theirre still growing business. when you get to china and you look at the metrics, because that actually strips away the effect of having restaurants bumping up your overall number, weak.s where it is china, for example, it is not recovering as they expected. .ctual growth was about 2% the estimate across analysts was closer to 9.6%. india, which makes up a smaller piece of the pie, china makes up more than half -- 18% drop in profits. on top of all of that, they are saying eps growth will not meet the 10% target. it will be in the low single digits, partly because of this and partly because they are taking a currency had. third quarter currency hedge was at about 29 million u.s. dollars. angie: but investors know that it is all about china at the end of the day. business -- huge impact for yum. this is a very global
company. a good example would be the kfc brand. i was going through the earnings statement, not very interesting stuff -- [laughter] reporter: but it was about 90% of the revenue. this is what the division looks like, kfc 4900. you put all of this together, that is about 7000. surprisingly, kfc in china is growing at about 3%. the weak spot, they say, is in casual dining of pizza hut. that green part is actually above 1%. others, their purchases and acquisitions over the past few years. this. just end on this is interesting, a lesson in pr. whiles the statement -- it remains difficult to forecast china's sales, we are now salesting that same-store are in the low single digit negative. in other words, it is a fancy way of saying they don't expect
-- angie: this is the operative -- reporter: that's the quote of the day. a low single-digit negative. that's according to the statement. i am not making things up. angie: all right, david. a lesson in interesting sentence structure. thanks. youking other headlines for right now -- adobe fell as much as 13% in extended trading after its forecast fell short of estimates. adobe said sales for the year ending in november 2015 will be profit5.7 billion in excluding certain costs, while forecast at 2.70 a share. slightlywere expecting more. stock is up 70% so far this year. in plunged in after-hours trading after cutting third-quarter sales forecast. they had predicted revenue of up to 620 million dollars, but now say that revenue of about $573
million is more likely. foreign currency headwinds are slower than expected, which is the region -- the reason for the revision. star board value says yahoo!'s stock drop is a terrific opportunity, because the price taxed separated. they encouraged yahoo! to spin off alibaba, still awaiting approval. yahoos shares have fallen by 30% since the move was announced. after the alibaba ipo. alibaba was going up, and andaba is going back down, it moves on the green line with alibaba. as a relates to the expectations the stockpinoff, trades today, yahoo! less the portion of alibaba, is not reflecting any value. our view is that it pretty much
reflects the worst-case scenario in terms of taxation. we think it is a terrific opportunity. never mind the devaluation back in august, the yuan is gaining in use overseas. china's currency overtook the yen. stephen engle is here. what is the significance? guest: it is quite significant. imf'ss part of the criteria of sdr inclusion. i will get to that in a bit. here are the top cointreau currencies as of august 2015 for the percentage of global payments. you want, number four. still small, but a record high -- 2.79%. the yen is 2.76%, fairly close to the u.s. dollar, which dominates at 45%. the yuan at number four in august of this year -- think of
it at the end of 2012, it was at about number 16. in 2014, it was number 12. it already has risen to number four. china is really pushing the overseas use of the yuan. earlier this year, the yuan became the most active currency for payments to china and hong kong -- eight most active currency for payments. appointed clearing center lenders in about 10 different countries, including two more countries. this year it has also opened up its local bond and fx markets to foreign central banks. this has been a push by the chinese to get the yuan to be used more internationally. that is reflected in the latest data from swift. also, this is a side note -- number two already for global issuance of letters of credit by value at 9.1%. the yuan's number two behind the u.s., which is dominant by about 80%. angie: that really reaffirms
china's stance that it is increasingly being used as a global currency, which supports an imf decision into the fdr basket? stephen: i think so. this is what a number of different economists and traders are saying. let's bring up a quote predicting back in january that you -- that the yuan would indeed surpassed the yen this year. he says the data are positive for the possibility of the yuan getting into the sdr basket. as you can see here, which is the devaluation, small in value terms -- it shows the devaluation, while small, has not driven people away from the yuan. one share of currency that makes up the official reserve -- last year the yuan was number seven in the rankings. international banking liabilities and global debt
security, number two, and use in foreign exchange markets, the third criteria, which now it is. remember that the sdr is the dollar euro yen in pound. the yen is still in the sdr basket, whether the yuan adds to that. i add this as well, because the foreign exchange reserves are out this morning from china. as you can see, china's u.s. dollar -- foreign exchange reserve in u.s. dollar terms -- has been trickling as they detect the weakness in the yuan. angie: about half $1 trillion since its june 2014 hi. thank you for that. coming up, opportunity knocking. our next guest tells us where to find value in u.s. and chinese stocks. we are back in two bang. you are watching "first up there go -- first up." ♪
talk to the united states to ensure that their wargames don't interfere with each other over in syria. moscow says it wants broad discussion about the campaign against terrorist groups in the country, but washington prefers to limit the agenda to technical issues and pilot a pilot communications. the u.s. has also denounced russia's incursion into turkish airspace, calling it irresponsible behavior. indonesia says it is impossible to put a firm date on when the force buyers will be extinguished. the national disaster management authority says it depends on whether and if farmers will continue to clear the land. smoke from the fires had thailand, andand the president's recent trip to amatra was cut short due to plane that could not land. japan and canada have shared a nobel prize for physics.
they discovered that subatomic articles, neutrinos, half-mast. it is said that their work changed our understanding of matter. the nobels announcements today,e with chemistry literature on thursday, the peace prize on friday, and economics on monday. next, toyota's new system aims to take the staring -- strain out of driving. more when first up returns. ♪
angie: time for a look at some of the top tour -- top corporate stories. chinese consumers seemed happy to keep spending online despite the slowdown. a new survey suggests alibaba and jd.com could benefit as shoppers double the amount they are prepared to spend on a single luxury item to more than $660. consumers are said to be attracted by deals, but kpmg found that up to one third of respondents paid full price for purchases. microsoft is introducing its first ever laptop, the service book, featuring a detachable -- surface book, featuring a detachable screen and a battery that lost 12 hours.
-- last 12 hours. sale later this month with a $1500 price tag. may structure its alliance with nissan for the french government. the options are said to include giving nissan more powerful by cutting at stake below 40%, -- theould trigger partnership fable -- favors reynault. nissan is now worth twice as much as its partner. those are the top headlines. i am haslinda. has raised the stakes in the automated driving game with the hands-free system that could be in your car by the end of the decade. ig taking a test drive
on the tokyo metropolitan highway. craig: we are sitting in a modified lexus gs. height --ing at the taking a look at the highway teammate concept. this is a lexus and equipped with cameras above the rearview mirror. behind us, in the corners of the rear windshield, there are black cylinders and pointy tops on the roof of the car. all of this technology allows this lexus to drive hands-free. you can take your hands off of the steering wheel, take your foot off the gas, and the car right now is driving all by itself. middle of thehe vehicle will show you that the car you are driving in is perfectly centered in your lane. cars go by,h other or watch yourself go by other cars.
you just merge onto the expressway. it is capable of changing lanes and taking over other cars that are slow in the next lane, or in front of you. it is also able to exit the expressway all by itself. inlong as you've plugged where you want to go on tbs before taking off on -- gps before taking off on your trip. angie: eating in the car can take on a whole new aspect. that was bloomberg news auto industry reporter craig trudell. can free on the highway -- hands-free on the highway. toyota plans to introduce the system by 2020. angie: week three went well. well underway, rather, at the rugby world cup. here is the latest. romania scored 17 points in the last 28 minutes over canada in
the biggest comeback in world cup history. meanwhile, required -- uruguay had three tries, but failed to rattle. later, south africa takes on the usa, while india faces georgia. namibia faces georgia. in the second half, romania fought back before a penalty secured the win. it is the first time canada has been defeated in their home , while romania will finish third and face italy on sunday. that also brings automatic qualifications for the 2019 world cup. emerging markets have been hurt by weak commodity prices and the outflow of funds is a worry. however, speaking at the influential summit in london, recent volatility in china will
not affect growth in the long term. some veryas been significant equity market volatility, but not a demonstrable wealth affect on real growth numbers. i would still say chinese numbers are more or less in line with where they would have been. actually looks better than it has at any point in the last 12 months. the rest of emerging markets are not a worry. -- complications slightly plunged china. this means that for certain parts of x japan, x china, ask -- a and asia >> does that mean malaysia? >> i'm not going to get specific on that. it's a big part of the world's population, john, and a reasonable part of the gdp. there are concerns. it is not just that part of
asia, but russia, south africa, turkey -- there are a number of where the-- countries outflow of funds will represent a challenge. >> how long do you think that worry can go? on a land andut say not as bad as the asian crisis in the late 1990's. foreign exchange reserves look a lot better. look towards an emerging market corporate's if you really want an area of concern. they borrowed a lot of money. in the crisis, we have seen a 50% jump in the borrowing of hard currency. a love that has come from emerging market -- a lots of that has come from emerging markets. these corporate's
have done inflows, and that is fine, others may very well be playing a carry game. we have seen that done. i think we are going to get some stress in those areas. >> do you think that is a question about how good those ?ompanies are maybe they don't have as good of management as people during the boom. >> the last five years have been very kind for emerging markets. you have had a real tailwind. cheap funding, surging commodity prices, rapid chinese growth. they have used that to
is seven: 30 in hong kong. it has been raining since the weekend. the system should be flying through hong kong. we are 30 minutes away from the opening of trading in japan and south korea. mobile, an on your online, you are watching "first up." ♪ samsung has just released its preliminary earnings. yvonne man breaking those
numbers for us out of samsung. yvonne: hi, angie. pretty good news for samsung this quarter. it is a beat from what the forecast was. 7.3 trillion one is what we are seeing. the forecast was for 6.7 trillion, so we are more than one trillion won above instruments. -- estimates. the forecast was about 63% growth, so much higher than that. we are still going to see that these numbers are way smaller than what we saw two years ago, 10.2 trillion won back in 2013. sales wise was also a beat. the forecast was 50.6 trillion. the other numbers -- actual numbers are 50.1 trillion. about 7% on year growth that we have seen for the company. this is slight good news for what we have seen from the past year.
22 million dollars of market value has been wiped out of the stock, roughly the size of nintendo. it has been a rough year for the smartphone maker. the s six, the s-6 edge sales, the note sales have been lukewarm at best and have sputtered against apple in chinese makers. quarters, wefive have seen profits fall, but today we are seeing a beach here. that number coming in at 7.3 trillion won. back to you. angie: yvonne man, thanks for that. let's check in on markets in asia. to new zealand, where we are percent higher. new zealand dollar spot unchanged at 65 u.s. cents to istralia, where the asx 200 looking like this yesterday. we have been keeping rates unchanged at 2%. the forecast for the next month remains that way. let's check out australia right now. if we can.
of course we are -- there it is. it is 1/3 of 1% higher. u.s.alian spot is at 71 cents. we are counting down openings in japan and korea. closed- nikkei to 25 higher. futures in chicago are pointing to a slightly higher open is the start of the session. we had that doj decision. the central bank making a decision on whether or not -- the economy. dollar-yen 120.25. we are expecting several important announcements from japan today. the doj will deliver its latest willy decision -- boj deliver its latest policy decision, and the prime minister is in a bit of a cabinet shuffle. we have reporters joining us from tokyo. will the boj increase stimulus today? from reporting inside
the bank, as recently as last week, many officials thought that the bank could stay on hold for now. there is time to look at more data coming up. we talked to economists, we see we see them saying there could be a change today. october the 13th seems like the most likely date for a change. is thing to keep in mind that the markets have been surprised before. that is the message, really. keep watching a day today. angie: it was halloween, wasn't ? when he surprised the markets with that stimulus. the thing is, a lot of people are saying that this man is no stranger to doing what he needs to do even if it is to surprise the markets. and of course, so far away from that 2% inflation goal, it seems
like it is inevitable. reporter: i'm not sure if i would say inevitable, but we are certainly seeing a lot of problems with inflation. that is the key goal for the governor. recently, inflation disappeared. we had a drop in prices. but we need to strip out the impact of oil, and the governor does seem to be doing that, you start to see some price gains. i think when people look to his press conference today, one thing to look at is his comments about a virtuous economic cycle. that is where he sees a potential for the economy to come forward. we didn'tprofit, if get wage gains, then we get spending. that is what the governor is looking to, some really listen to what he has to say today about the cycle. boje: what does the meeting mean in terms of a
be-nomic threat? reporter: the prime minister has been a lot of heavy lifting. if it is nothing to invigorate the public and make people go and spent, things might turn to the prime minister and whether he will consider a spending package. angie: brad miller, thank you so much for that. shuffles his team, hoping to win back some public support. abe -- why is up a abeg this -- they doing -- doing this now? reporter: there is a lot of pressure on him to show what he is doing for the economy. summer focusing on issues unpopular with the public. he has an upper house election coming up next year, so we cannot afford to lose support at the moment. --es showed that most people
polls show that most people, the average japanese in the street, are not showing any benefit from policies introduced so far. out is at reach tradition in japan. it has been a year since the last one. -- cap it reach out is a tradition in japan. binet reach out is a tradition in japan. it has been a year since the last one. angie: what are the main changes we should be looking out for? reporter: in a sense, it is kind of a status quo cabinet in that he is keeping all the major positions aside for now. the reports are saying that the finance minister will remain where he is, the economy 's chief cabinet secretary, a role often referred to as the wife of the prime minister -- he will stay in
place. the prime minister will also stay in place. having said that, there are a huge number of posts that will change. the cabinet has 19 people. the most important new post we are seeing is the post in charge of population decline, or putting the brakes on population decline. reports are saying that the person he is going to pick for is a person who has been relatively unknown until now. the other thing he will do is try to retain a certain number of women. abe had this policy of ringing women to 30% of managed -- women to30% of management positions by 2020. he will only have three people in his new, which falls far short of that target unfortunately. angie: thank you so much for that. shuffle in tokyo. ended its longest
winning streak of the year. , cioore is chris burleson at global financial private capital. he joins us now from florida. good times are over officially? guest: it's interesting. failed that when the fed to raise and everybody looked around saying we want normalization and the market we turned around and said, well, with maybe everything turns down and 0% interest rates, we are good to go. a schizophrenic market from that viewpoint. angie: it really is. so what do investors do? how are you advising your clients? to look think you want for those areas that are down and cheap, but still have real growth. you don't want these companies that are reporting and showing weak sales. whether it is yum brands or coca-cola or whatever, i think
you need to find real growth at a cheap rate. we have seen some of that now. to me, the energy stocks look great. particularly the big multinationals -- they have had a real boost short-term because putin is not best friends with syria and wants to see oil prices up, and it is a wake-up call for the rest of the gulf states. that, i think, has further to go. if you look all the way to the end of the decade, the compounding at 5% is a terrific opportunity with the 10 year treasury at about 2.2%. angie: how does china factory and on all of this? the last time we talked, it was a bit of a meltdown, and you said it was a good entry point for consumer related stocks. a lot of people are still saying that. of course if you would have a bigger discount.
if you had waited, you would have a bigger discount. guest: you are right. it was at 20% and went down another 15% quickly. our entry at things like alibaba was early for sure, but i think that tencent, j.d..com, and baidu are pretty good buys. i think you'll see now that they are up. with china is that they are a giant shiny new computer with great hardware and it just needs software. the internet is what will bring it. i remain cautiously optimistic about china. angie: i was just at the bloomberg markets, the most influential conference. it kicked off in hong kong and ended in new york. that was the consensus of the group. there is a lot of optimism that china could still have a lot of upside here. of course, you just have to wait through all of this volatility and reform. juliette: at -- guest: absolutely.
if you look at japan, they went through the same thing in the 1950's and 1960's as exporters, and once they turned into a consumer economy, off they went until 1989 or thereabouts. i think china has a lot of room in front of it to go. angie: what about the fourth quarter for the u.s.? we're going to see lift off from the fed? are we going to see earnings improve? are we going to see a weaker u.s. dollar? what are we going to see? guest: i think the fed is on hold. there is no question that the employment number makes them nervous. .hey were nervous about china you are not going to see higher ,nterest rates until probably at the earliest, december, and probably march of 2016. it isn't that bad for stocks. people left to realize that we cyclicalsingle goal --
correction and a second market. watch for stocks indicate that they can't make their numbers, because in a 10% correction they could be down 50%. we will find it is a tough market all the way. angie: but do you think perhaps the markets, after this bout of volatility, might have found their ceilings? guest: i agree. i think volatility is setting itself up for a collapse because there can only be so much of this wall of whirly climbing where there is emotional situations. you could having -- have another national incident, but we have seen this period before. he calmed down period that we see after a high. a volatility is what we are approaching. collapsing, i say a lot lower over the next three
angie: checking other stories making headlines. is accusedernational of coalition led war crimes in yemen. the group has examined 13 airstrikes that killed at least 100 civilians, including 59 children. amnesty also documents the use of cluster bombs, banned worldwide. coalition is acting with disregard for civilian lives and safety. thailand's prime minister has
repealed its criticism. reporters ignore its government achievements and focus on things like human rights. the interim constitution gives prayuth absolute power, but he insists he has never broken the law. he has some and hundreds of people to military camps for what he calls "attitude adjustments." speaker -- korean's fifa president candidate says he is of a potential suspension. he is under investigation for payments he made two other football officials during south korea's official bid for the 2013 red cup. -- world cup. he denies any wrongdoing and says the suspension is being used as a hitman to keep him from running against sepp blatter. let's take a look at what is
going on in emerging markets, because some analysts are saying what we are currently seeing could rival the 1997 asian crisis. others say now is the time to get in. juliette has been taking a look at this for us. let's start with the bears. what are the bears worried about? seeing nowhat we are could rival 1997 or be even worse. what you see here over the past six months, basically since june, we have seen a big stall in emerging markets. a lot of it is happening -- fall in emerging markets. a lot of it has happened over the past couple of months. at the beginning of that crisis, they say it could actually last until march 2017. they are saying we are in the beginning stages of the next contractionary cycle and that it will be a very wild ride over the next 18 to 24 months. they are saying it is similar to what we saw in the crash. we are just starting to see the beginning of this. they are not the only ones.
foreign asset management's hedge funds are at 100 percent this year. they say the turmoil will in fact continue. they're .2 analogies between what we see now and what we saw in -- they are pointing between analogies between what they saw in 1997 and now. they said the tamil will about 18 to 24 months. -- tom old look at -- tumult will continue. but the markets are very different now in terms of infrastructure and all the rest then they were back in 1997. juliette: and you can say that with capital outflows. they are set to post their biggest gain in 24 years. you could say -- the company saying the glass is half-full is
franklin templeton. they are saying now is the time to buy. you are seeing the malaysian ringgit at levels we have not seen in a long time. once in at even a decade opportunity, they are saying, it is a multi-decade opportunity. shoulde saying what we be buying at the moment is the mexican peso. it is down 12% this year. also the malaysian ringgit, which is at levels we have not seen since 1998. if we can have a quick look at what we are calling -- what they are calling that we should buy at the moment. as i mentioned, the peso and the ring at, but there's saying what buthouldn't -- ringgit, they are saying we should not by south african assets. otherway from some of the emerging assets, like turkey, south africa, and russia. different views here. is it going to be another
financial crash like we saw in 1997, or are the smart people going to make some money out of prices or assets that are very cheap? one thing is for sure, we have a bit of a reprieve right now with the shed not raising rates until perhaps in december of next year. everything is still looking steady for emerging markets. thank you for that. coming up next, as earnings kick back into gear, we will take a look at market movers. make their first stock take when first up returns. ♪
that led to a mixed close on wall street. ♪ all right, welcome to the stock exchange. we are taking a look ahead to the open soon -- the opens in japan and south korea. our reporters are telling us what they are keeping an eye on. reporter: i watched samsara all morning, so i chose another stock. -- samsung all morning. this is a retail brand that we all love. up 73% this year. operating profit came out 30% higher than last year. that was above the analysts. they came in higher than the prior guidance of ¥105. it looks like the market could be falling today. angie: ok. that is you bonds -- yvonne's call. david.
reporter: we are looking at a company called olympic group. stock is not very well. the company had its own target for the first half and it is saying it is not going to make half of it. 20 -- ¥294 million is the preliminary number. supermarkets, discount stores, sporting goods. you have the sales tax, of course. that is what i am watching. 1300 employees, based mostly out of tokyo. angie: willie go up or down? reporter: i expect it to go down. angie: when you get the gold, silver, or bronze? reporter: i have stuck my head up in the past. [laughter] juliette has a couple of wins under her belt. juliette: this company operates
department stores in japan. people must have colds. [laughter] they also have catalog and online sales and they have come through with a forecast of their full-year operating profit up 90% to 10 million. you can see this big drop coming through in the last month. -- profit forecast forecast. >> that's a pretty good one. david: we made a forecast, and guess what -- angie: just read that one up. -- rip that one up. anyway, that's the verdict from the stock exchange. back in an hour to see how the
john: i'm john heilemann. mark: and i'm mark halperin. with all due respect to lunch and dinner, the only meal that is good all day, breakfast. ♪ john: on the show tonight, and two dudes in manhattan and i don't mean us. but first, to legacy candidates about their messages and whether they can secure their party's nominations. hillary clinton and jeb bush are both in iowa today. for her part, hillary